Workaday problems on national holiday

Commentaries marking Saint Stephen’s day turn invariably around some of the usual controversies which divide left and right: Hungary’s international image, internal ideological divisions and the economic policies advisable in today’s unfavourable world business climate.

In Heti Válasz, E. B. (Eszter Balla) quotes from the official greetings sent from Washington to Budapest on the occasion of the national holiday as proof that allegations warning of imminent American diplomatic sanctions against Hungary are unfounded.

As BudaPost reported earlier this month, Hungarian-American professor Charles Gati, a former State Department advisor told 168 óra that Washington was deeply concerned about the plight of democracy in Hungary, and did not even exclude recalling its ambassador as a sign of protest, dependant on the contents of an electoral reform law to be passed before the end of the year.

“A very different message has arrived from Barack Obama and Hillary Clinton,” Balla argues, suggesting that the warm style of the cables sent by the President and the Secretary of State to their Hungarian counterparts clearly shows that Mr Gati’s fears were grossly exaggerated.

In Népszabadság, Miklós Hargitai remarks that August 20^th is the only national holiday which unites Hungarians, regardless of their political affiliations. No other official celebration can attract hundreds of thousands of people from all walks of life. The actual meaning of the date has been regularly rewritten by successive régimes over the past century, according to their ideological preferences, but whatever novelties were introduced, none have dared to suppress the traditional fireworks of the night of Saint Stephen’s day in Budapest, on the banks of the Danube. Hargitai ends his comment on a bitter note: “There is no need for ideas. A circus-like show deprived of any ideological content is the only thing that can make Hungarians celebrate peacefully and enjoy themselves in the company of other Hungarians.”

The leading left-wing daily also inquires into what Hungary should be doing to face the recent slump in Western financial markets, which is also negatively affecting the prospect of domestic economic growth. Top businessmen and left-liberal analysts all believe that earlier hopes of an annual 3 per cent growth in GDP have now foundered. On top of that, no obvious ways to accelerate growth seem to be in sight. Gábor Oblath, a prestigious expert on macroeconomic tendencies, believes the government is in no position to loosen fiscal controls, if it wants Brussels to terminate the excessive deficit procedure Hungary has been subject to since its accession to the European Union.

András Vértes, director of the GKI business research institute argues that in order to break out from that trap, the government should reverse its economic policies. He calls for special taxes imposed on telecommunications industries to be withdrawn and taxes on banks alleviated in order to provide an incentive for investment. To offset the increase in the public deficit which would result from this, Vértes deems it necessary to revoke the flat income tax introduced last year and argues in favour of a new real estate tax. He admits, however, that such measures would amount to a disavowal of the government’s philosophy and are therefore extremely unlikely.

In Figyelő, Gábor Lambert observes that the international trust won by Hungary as a result of a full year’s responsible fiscal policy has proven extremely fragile. The moment that a new wave of fear swept through the markets, the Swiss Franc reached record levels against the Forint, increasing the debt burden of private citizens and local councils alike, indebted in foreign currencies. (BudaPost, August 13.)  Lambert writes that any public interference to enforce special banking regimes to bring relief to debtors would undermine the financial standing of Hungarian banks, and therefore endanger Hungary’s debt rating. “Lie low and hope for the best,” the analyst suggests: “No more unorthodox moves, please”.  Perhaps the FED, unlike the American political élite, will be able to contain the damage. Perhaps the European Central Bank knows what it is doing. Perhaps the hysteria will subside…, he concludes.

Another analyst, András Giday believes there is still some room for manoeuvre. In an OpEd piece in HVG, he suggests the extra burden on citizens indebted in Swiss Francs should be spread between them, their banks and the government, as all are equally responsible for the ‘original sin’ of borrowing in Swiss Francs over the past decade. Giday believes debts denominated in Swiss Francs cannot be converted into Forints unless the debtors are ready to accept 70 to 80 per cent increases in their debt. Instead, he suggests, they should be converted into Euros, limiting the loss to about 10 to 30 per cent. That loss should be assessed once a year on the basis of the yearly average of the exchange rates, and the first 10 per cent should be covered by the debtor. In case the Euro sinks below that level, the banks should follow suite, while the state should undertake its share of the burden only if the value of the Euro sinks below 1.04 Francs. “Recent rapid oscillations in the exchange rates should be considered as a kind of natural calamity; it would therefore only be fair to spread the damage among all the parties concerned,” Giday argues.

Tags: debt, foreign affairs